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Red States Benefit from Economic Freedom, Says Study

June 29, 2005

NCPA/Fraser Study Also Shows Citizens Profit In More Economically Free States

DALLAS, Texas (June 29, 2005) – States that voted for George W. Bush in the last election tend to have less government regulation and more economic freedom than states that voted for Sen. John Kerry, according to a report released today by the National Center for Policy Analysis (NCPA) and Canada’s Fraser Institute. Ten of the 12 states with the most economic freedom were carried by President Bush (Red states), and 7 of the 12 least economically free states were carried by Sen. Kerry (Blue states).

“People in Red states prefer more economic freedom,” said NCPA Senior Fellow Devon Herrick. “The pay-off is that they enjoy higher economic growth.”

The report ranks states based on the degree of economic freedom. The three principal factors are: size of the state’s tax burden, size of state government in relation to the state’s economy, and flexibility of the state’s labor market.

Delaware remained at the top of the index for the third straight year and West Virginia ranked last, also for the third straight year. The index ranks states on a scale of 1 to 10 (highest) and each one-point increase tends to produce about $4,500 more in per capita income (gross domestic product). While economic freedom is not the sole determinant of a state’s wealth, the correlation is strong.

Compared to the average (median) state, Delaware enjoys $6,772 more income (GDP) because of its higher level of economic freedom.

By contrast, West Virginia has $8,126 less income because of its lower level of economic freedom.

The 10 highest ranking red states enjoyed $3,837 in extra per capita income, while the 10 lowest ranking blue states lose $3,205 per person relative to the average state.

This year’s rankings represent a marked improvement for North Dakota, which jumped to 27 th from 34 th, and Maryland, which improved to 16 th from 21 st. But Oklahoma fell 7 places to 36 th and Illinois fell from 15 th to 21 st.

While economic freedom in Canada stayed the same on average in the 2005 report, rankings for most of the provinces improved relative to the U.S. In the 2004 report, only 4 of the 10 Canadian provinces ranked higher than West Virginia; in the 2005 report, only 4 ranked lower.

Editor’s note: Please see attached chart.

Economic Freedom Index 2005

Rank

State

Economic Freedom Score**

Gain (Loss) in Per Capita GDP*

2004 Election

Per Capita GDP

Rank in 2004

1

Delaware

8.4

$6,772

Blue

58,503

1

2

Tennessee

8.1

$5,418

Red

32,837

2

3

Florida

8.0

$4,966

Red

31,183

3

4

Arizona

7.9

$4,515

Red

31,571

5

4

New Hampshire

7.9

$4,515

Blue

36,447

3

4

Virginia

7.9

$4,515

Red

39,462

6

7

Texas

7.8

$4,063

Red

35,583

6

8

South Dakota

7.7

$3,612

Red

32,880

8

9

Colorado

7.6

$3,160

Red

39,860

8

10

Georgia

7.5

$2,709

Red

35,795

10

10

Nevada

7.5

$2,709

Red

37,455

10

10

North Carolina

7.5

$2,709

Red

36,145

12

13

Indiana

7.4

$2,257

Red

39,462

12

14

Nebraska

7.3

$1,806

Red

35,288

15

14

Utah

7.3

$1,806

Red

31,471

15

16

Alabama

7.2

$1,354

Red

28,035

15

16

Maryland

7.2

$1,354

Blue

37,038

21

16

Massachusetts

7.2

$1,354

Blue

44,861

15

16

Missouri

7.2

$1,354

Red

33,079

15

16

South Carolina

7.2

$1,354

Red

29,815

14

21

Illinois

7.1

$903

Blue

38,624

15

21

Kansas

7.1

$903

Red

33,007

21

23

Iowa

7.0

$451

Red

33,460

25

23

Pennsylvania

7.0

$451

Blue

34,792

25

25

Connecticut

6.9

$0

Blue

47,922

24

25

Louisiana

6.9

$0

Red

29,396

21

27

Kentucky

6.8

($451)

Red

29,899

29

27

Michigan

6.8

($451)

Blue

34,978

29

27

New Jersey

6.8

($451)

Blue

44,333

28

27

North Dakota

6.8

($451)

Red

31,203

34

27

Wyoming

6.8

($451)

Red

40,665

25

32

Arkansas

6.7

($903)

Red

26,579

29

32

Mississippi

6.7

($903)

Red

24,117

29

34

Idaho

6.6

($1,354)

Red

28,708

34

34

Minnesota

6.6

($1,354)

Blue

39,815

36

36

Oklahoma

6.5

($1,806)

Red

27,259

29

36

Wisconsin

6.5

($1,806)

Blue

35,048

36

38

Vermont

6.4

($2,257)

Blue

31,804

38

39

Ohio

6.3

($2,709)

Red

34,029

38

39

Oregon

6.3

($2,709)

Blue

32,706

38

39

Washington

6.3

($2,709)

Blue

38,394

38

42

Montana

6.2

($3,160)

Red

26,114

43

43

California

6.1

($3,612)

Blue

39,077

42

43

Hawaii

6.1

($3,612)

Blue

35,463

43

43

New Mexico

6.1

($3,612)

Red

28,895

43

46

Alaska

6.0

($4,063)

Red

46,312

46

47

Maine

5.9

($4,515)

Blue

30,148

47

47

New York

5.9

($4,515)

Blue

41,395

47

49

Rhode Island

5.8

($4,966)

Blue

34,622

47

50

West Virginia

5.1

($8,126)

Red

25,219

50

* Gain (Loss) in Per Capita GDP reflects the estimated amount of economic activity per person that a state gains (or loses)compared to the average state based on its level of economic freedom.